Insurance firms eyeing investments in A-share listed pharma companies

Insurance companies have shown growing interest in A-share listed companies, especially those with great potential in the pharmaceutical and healthcare sector.

A total of 84 insurers and insurance asset managers conducted research on A-share listed companies for some 538 times in April through web conferencing, video conferencing or on-site inspections, according to Wind, a financial data provider in China.

The numbers increased from March when 71 insurers and insurance asset managers carried out such studies on A-share listed companies for some 344 times.

The companies studied in April were mainly from industries such as medicine and healthcare, electronics, application software and components.

At least nine insurers and insurance asset managers participated in the research of Shenzhen Mindray Bio-Medical Electronics Co Ltd, Hangzhou Hikvision Digital Technology Co Ltd, Zhejiang Dahua Technology Co Ltd, Betta Pharmaceuticals Co Ltd, NanJi E-Commerce Co Ltd, BOE Technology Group Co Ltd, LianChuang Electronic Technology Co Ltd, Zhejiang Tianyu Pharmaceutical Co Ltd and Winning Health Technology Group Co Ltd, Wind said.

Mindray received the most attention. Last month, 24 insurers and insurance asset mangers studied the medical devices and solutions provider whose patient monitors, ventilators and ultrasound devices are crucial in the diagnosis and treatment of COVID-19 patients.

"Many insurance companies have shifted from short-term investments to long-term investments due to the novel coronavirus outbreak," said Wang Guojun, a finance professor at the University of International Business and Economics in Beijing.

"It is sensible for insurers to invest in listed companies in the medical and healthcare industry that maintained good performance amid the pandemic. Insurers will allocate their assets in accordance with major strategic tasks of China to achieve relatively high yields and ensure the safety of earnings."

By the end of March, the balance of utilized insurance funds reached 19.43 trillion yuan ($2.73 trillion), said the China Banking and Insurance Regulatory Commission.

Zhou Liang, vice-chairman of the commission, said the regulator will actively support insurers to invest in compliance with laws and regulations, abide by market-oriented principles and implement long-term, prudent value investing strategies.

Those insurers that have higher solvency adequacy ratios will be allowed to moderately increase the proportion of their investments in equity assets-to-total assets, thus breaking out of the limitation that says the book balance of an insurer's total investment in equity assets should be no more than 30 percent of total assets at the end of the previous quarter, Zhou said at a news conference on March 22.

Insurers have also shown a keen interest in companies listed on the Shenzhen, Guangdong province-based ChiNext, a Nasdaq-style board of growth enterprises. Wind said 113 insurers and insurance asset managers conducted research on A-share listed companies for some 1,425 times from the beginning of this year to May 12. A fairly large part of the companies are listed on the ChiNext.

China kicked off a reform on April 27 to fast track IPOs on the ChiNext, which will replace its approval-based IPO system with a registration-based one to better cultivate new industry startups and bolster the real economy.

"We will see a more serious divergence in stock prices on the ChiNext board after the reform. That is why insurance companies conducted thorough research on listed companies to make wise decisions on asset allocation," Wang said.

Last year, stock and mutual fund investments by insurers surveyed accounted for 13 percent of their investment portfolio. The volume of investment in these two categories increased by 43.4 percent year-on-year, according to the results of a survey published by the Insurance Asset Management Association of China on May 6.

Having received feedback from 190 insurers, the survey showed that equity investment accounted for 8.4 percent of their investment portfolio, and the volume of investment rose 80 percent from the previous year.